Monday, November 5, 2007

Another One Bites the Dust

"The source of Citigroup's write-down is at least as significant as its size. The bank's estimate of its losses has changed so rapidly in large part because the models it used to value hard-to-trade securities relied heavily on credit ratings, according to people familiar with the models."

Solid sources tell me that thirty years ago, when a party walked into a bond lawyer’s office; he could expect the lawyer to take a hard look at his project’s finances. It was a thing called ‘due diligence’ and it had a lot to do with legal ethics (which still existed at the time, so I hear). If the project were not solid, the attorney would not endorse it. The attorney would walk away from a healthy fee that he surely could have got if he had only endorsed a shaky project, putting the investing public at risk. Bad for business, good for integrity.

It’s different now. Teams of lawyers, assessors, and accountants, who should all be working independently but don’t, travel around in suits. Certification of risk assessment is a big business, and the groups who get hired are the one’s who provide the biggest bottom line for the borrower. And the results are starting to play out in the housing market. Now, drum roll please…

These are the same teams who set credit ratings for government bonds. You know, the one’s for schools and roads that assume application fees from a thousand new building permits per year, the associated slush fund of builders’ impact fees, and a steady increase in tax revenue from a constantly rising housing values.

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Brick Oven is a collection of raw thoughts, sometimes made while sober, that the author hopes to use as a resource to aid in the writing of a future fictional book. Some of these thoughts include topics associated with the 2nd Amendment, others are political, but all are fictional, at least in part. These thoughts are to be discounted as nothing other than delusional, drunken rants, collected for future use in a fictional novel. Violence is always bad.

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